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Dubai United Arab Emirates
Cash purchases are gaining ground in Dubai's residential property market as interest rates rise, but mortgages continue to finance the majority of transactions at some property brokerages, highlighting the continued importance of bank lending to the market.
Data from property brokerage Betterhomes showed that cash purchases accounted for 44 per cent of its residential sales in the third quarter of 2026, up from 36 per cent in the second quarter.
Consequently, the share of mortgage-backed purchases fell to 56 per cent in Q3, from 64 per cent in Q2, although it remained above the 50 per cent recorded in Q1.
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The increase in cash purchases came as borrowing costs faced renewed upward pressure following the Central Bank of the UAE's decision to raise its Base Rate from 3.65 per cent to 3.90 per cent, effective September 17.
Betterhomes said the growing share of cash buyers reflects a deep pool of purchasers able to complete transactions without relying on bank financing, providing some resilience to the market as borrowing costs increase.
However, mortgages remain an important source of funding for property purchases. Lomond, the mortgage adviser cited in the report, said lender appetite remained healthy among both resident and non-resident buyers, with banks continuing to compete for new business, particularly in refinancing and mortgage buyout cases.
What the rate changes mean for buyers
The UAE Central Bank's rate adjustment came amid changes in US monetary policy. The US Federal Reserve cut its benchmark interest rate by 25 basis points in September 2026, bringing its target range to 3.75 to 4 per cent. The UAE dirham's peg to the US dollar means domestic borrowing costs are influenced by movements in US interest rates, with Eibor generally responding to changes in monetary policy.
The Central Bank subsequently kept its Base Rate unchanged on October 28.
Betterhomes does not expect significant changes to standard fixed-rate mortgage products, although minor adjustments are anticipated in the fourth quarter. The more immediate impact could be on buyers' borrowing capacity rather than the actual interest rates offered on mortgages.
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